Why investors can expect the mobile search market to grow fast (Part 5 of 5)
Google might need to improve its engagement
In the previous part of this series, we discussed how Google (GOOG) is able to monetize its ads despite users spending less time on its apps. Although Google has managed to take up half of the mobile advertising market, the lesser time users spend could be a risk to Google in the long term. Lesser time spent means less user engagement, and user engagement is one of the most important factors in the online advertising world. There’s another risk to Google, though. Once other apps start to monetize their ads better, they could take even more market share away from Google.
Facebook has become a major force in the mobile advertising market
As the chart above shows and according to eMarketer, Facebook’s (FB) share of global mobile advertising revenue could increase from just 5% in 2012 to about 22% in 2014, while Google’s could decline from 53% in 2012 to 47% by 2014. Even Twitter’s (TWTR) share could increase from 1.5% in 2012 to 2.6% in 2014, while Pandora’s (P), YP’s, and Millenial Media’s (MM) shares are expected to decline.
In Q1 2014, Facebook’s advertising business managed year-over-year growth of 82%. This increase was driven by a mix shift, with more ads showing in News Feed. According to Facebook, News Feed ads have significantly higher engagement, click-through rates, and prices per ad compared to right-hand column ads, so a higher proportion of ads appearing in News Feed drives up the overall average price per ad.
Twitter is also generating higher click-through-rates for its ads
Twitter ads have become more relevant and generate clicks at a much higher rate. According to a report from Resolution Media, Twitter’s advertising click-through rate increased by about four times in the last year, from an index of 4.5 in Q1 2013 to 16.5 in Q4 2013. But click-through rates just about doubled for Facebook during the same period.
Twitter is also benefiting from the MoPub integration. In October last year, Twitter acquired MoPub, the company that helps mobile publishers manage their ad inventories. During its Q1 2014 earnings call, Twitter mentioned that it has now successfully integrated MoPub into its business and that MoPub has now reached over 1 billion Apple (AAPL) iOS and Android users, making it one of the largest in-app mobile ad exchanges.
Browse this series on Market Realist:
- Part 1 - Why investors can expect the mobile search market to grow fast
- Part 2 - Analyzing some must-know risks to mobile search market growth
- Part 3 - Why is Google losing mobile search share to mobile apps?
- Information Technology
- mobile advertising